A new competition enforcement agency with powers to regulate anti-competitive behavior across West Africa…
A new competition enforcement agency has been launched with powers to regulate anti-competitive behavior across West Africa.
The Economic Community of West African States (ECOWAS) has ushered in a new dawn in competition law enforcement with the commencement of operations of the ECOWAS Regional Competition Authority (ERCA).
In the final step towards full operation, ERCA today (October 2) sworn in its Council members. The appointment of members, who will serve four-year terms and oversee key matters such as requests for orders, mergers and acquisitions, and sanctions and compensation, means the organization is fully operational following its initial creation in 2019. do.
This development represents a major step forward for the ECOWAS region, which until now lacked a comprehensive and effective antitrust system. The regional economic zone currently comprises 15 countries: Benin, Burkina Faso, Cape Verde, Ivory Coast, Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone and Togo. Burkina Faso, Mali and Niger declared their withdrawal from ECOWAS in January, but this has not yet been ratified.
While some member states, such as Cape Verde, Gambia, Mali and Nigeria, have their own national competition authorities and merger control regimes, many countries are members of the West African Economic and Monetary Union (WAEMU) and the WAEMU Committee regulates competition. Law. However, WAEMU’s merger control regime is voluntary and not a suspension, said Richard Bryce, a partner at African law firm Bowmans in Johannesburg.
Bryce told ALB that African countries have been moving towards various forms of economic integration for some time to harness the continent’s potential in the face of globalization, including customs unions and free trade areas. He said that through its creation, trade barriers in the public sector have been gradually lowered. and an economic community.
“[This]regionalization increases the geographic scope of companies and increases the likelihood that anticompetitive behavior by companies in one country will affect companies in another. It was recognized that the regional competition law system is a necessary tool for African unity,” says Bryce.
The Gambia-based ERCA will impose various Competition Community Regulations (CCRs) on companies to crack down on anti-competitive behavior.
One of the key rules is that a mandatory merger notification regime will be in place. Under this regime, parties must notify ERCA of merger transactions that operate in at least two ECOWAS member states and meet certain financial criteria. If a merger is notified to ERCA, it is intended that separate notification to national authorities will not be required, but these authorities will be encouraged to demonstrate alignment with the regime.
The rules also prohibit competitors from agreeing to fix prices for goods or services, dividing markets, or engaging in bid rigging. “Companies in vertical relationships, such as suppliers and customers or manufacturers and distributors, also cannot engage in exclusive behavior. And they can’t abuse that advantage by engaging in exploitative behavior,” Bryce said.
ERCA defines a dominant firm as a firm with a market share of 40% or more, and estimates that a firm with a market share of more than 70% is a monopoly. Although this rule does not prohibit companies from obtaining a dominant position, it prohibits the abuse of this dominance.
Companies that violate the rules can face hefty fines, including fines of up to 10% of the company’s annual turnover, ranging from UA 300,000 (US$ 259,000) to UA 750,000 (US$ 55,000). This may involve payment of periodic fines ranging from USD 5,000,000. Although personal liability may be imposed in some cases, criminal liability is not envisaged.
Fines can be increased by 50% if there are aggravating factors, such as cartel cases where the company was the instigator or forced others to participate.
“The adoption of competition rules and the creation of ERCA are important steps towards achieving market efficiency, economic growth and integration in West Africa, which are fundamental objectives of ECOWAS,” the regulator said in a statement. said.
Bryce believes there are no real downsides to ERCA’s rollout, but like any new structure there will be challenges. “For ERCA to function effectively, effective cooperation, among other things, between member states is essential. There are also some gaps in the legislative instruments that need to be clarified. It’s not entirely clear whether it will or won’t be suspended, but it seems likely.”
ERCA’s full-scale launch comes at a time of significant change for other African competition law institutions. The Common Market for Eastern and Southern Africa (COMESA), Africa’s largest trade and investment market, announced in January a major overhaul of the COMESA Competition Commission (CCC), including strengthening the CCC’s enforcement powers and implementing a lenient program against cartel crimes. proposed. The review is expected to be considered for approval by the end of this year.
In other developments, Uganda enacted its long-awaited competition law earlier this year, while a study published in July cited competition as the leading source of compliance risk for in-house legal teams in Africa.
